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Market Update

Current themes to manage your financial institution's interest rate risk

Interest rate risk is back in the headlines and on the minds of many executive teams and boards of directors. Just a few weeks ago, financial institutions (FIs) were focused on deposit flows and thinking about the impact of an economic decline on credit quality. But the events surrounding the recent bank failures have brought interest rate risk management back to the forefront.

As a result, we’ve experienced a significant increase in hedging conversations and seen a record level of hedging activity with our FI clients. Banks and credit unions of all sizes throughout the country are placing tighter guardrails around their tolerance for financial risk. From our recent conversations, we wanted to share the following themes for consideration:

  1. FIs have realized that low-probability scenarios (like +/- 400 bps shocks) are no longer theoretical and are looking at how they can manage those outlier scenarios with hedging strategies.
  2. Hedging has coalesced around two concerns: OCI (and its resulting impact on TCE) and the cost of liquidity.
  3. Nearly two-thirds of our clients’ hedging activity YTD is to protect against rising rates, typically via a pay-fixed swap.
  4. FIs are not hedging all their risk to rising rates or even most.

With so much uncertainty in the markets, many FI’s are looking for efficient ways to harness the volatility and manage potential risks so they can continue to grow the business as conditions change. 

Since 1991, we’ve been committed to helping companies manage their financial risk. We remain steadfast in working alongside financial institutions to help establish prudent risk management strategies that show concerned regulators how you manage different market scenarios and assuage shareholders that you are taking steps to protect their investment.

If you have questions or you would like to discuss this further with a Chatham representative, contact us today.

What you need to know in less than two minutes

Through the use of interest rate swaps or option products, financial institutions can reduce their overall interest expense. Watch this brief video to learn more.

Contact our financial institutions team

  • Regan Campbell

    Managing Director
    Client Relationship Management

    Financial Institutions | Kennett Square, PA

  • Todd Cuppia

    Managing Director
    Balance Sheet Risk Management

    Financial Institutions | Kennett Square, PA

  • Ben Lewis

    Managing Director
    Head of Sales

    Financial Institutions | Denver, CO

Looking to learn more?

Chatham is here to help. Contact us today with questions or to learn how to get started.


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.